Refi, Refi, Refi

While my postings usually pertain to the purchase side of the business, I felt it necessary to post some information on the portion of the stimulus plan that pertains to the refinancing of mortgages. The media did a bang up job of letting the public know that the plan was released a couple of weeks ago, when in fact, it isn’t set to go into effect until the week of April 6th.

The whole idea behind the plan is to assist homeowners with no mortgage insurance on their current mortgage, but whose value has gone down to the point that if they were to refinance today, they would have less than 20% equity (80% Loan to Value) and now need PMI. With rates being where they have been lately, any savings in a homeowner’s mortgage payment would be negated by the need for PMI and therefore, eliminate the benefits of a refinance to a lower rate. The new plan, called Refi Plus, takes care of this.

Lending and computer systems will be revamped during the week-end of April 4th to easily determine if a borrower applying to refinance has a current mortgage being serviced by Fannie Mae or Freddie Mac. If that is the case and the original mortgage has no mortgage insurance, through either a 20% down payment at time of purchase, or paying on the loan to a point that the mortgage insurance was cancelled, their new mortgage will not require mortgage insurance, even if the new Loan to Value (LTV) exceeds 80%.

Homeowners looking to refinance after having put down less than 20% will still be able to take advantage of Refi Plus. Regardless of their new LTV, the PMI on their new mortgage would be calculated based on their original LTV as opposed to their current one, eliminating the need for more expensive PMI due to their home’s value declining.

The program is designed to help those who had equity in their home and as a result of declining home values, don’t have as much, if any. Borrowers with LTV of up to 105% will be eligible for this program, but again, it goes into effect during the week of April 6th. Getting your ducks in a row ahead of time will allow you to get a refinance application put through the system a little more efficiently. Lenders are currently experiencing slower turn around times due to the recent rate decline. This plan will only add to the work load and lenders don’t appear to be adding to their staffs. If you or someone you know would benefit from this program, or if you’re not sure and have questions, please contact me as soon as possible. Again, my office number is
1-888-282-2835 and my e-mail is rick@getanhonestmortgage.com.